kotak mahindra finance performance n ratios

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CHAPTER 1

Organization Profile


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About The Company

The Kotak Mahindra Group

Kotak Mahindra is one of India's leading financial organizations, offering a wide range of

financial services that encompass every sphere of life. From commercial banking, to stock

broking, to mutual funds, to life insurance, to investment banking, the group caters to the diversefinancial needs of individuals and corporates.

The group has a net worth of over Rs. 6,523 crore and has a distribution network of

branches, franchisees, representative offices and satellite offices across cities and towns in India

and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group

services around 6.2 million customer accounts.

Group Management

Mr. Uday Kotak Executive Vice Chairman & Managing Director

Mr. C. Jayaram

Mr. Dipak Gupta


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F ormation Of The Company

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance

Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &

Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's

when the company changed its name to Kotak Mahindra Finance Limited.

Since then it's been a steady and confident journey to growth and success.

1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting

1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market

1990 The Auto Finance division is started

1991The Investment Banking Division is started. Takes over FICOM, one of India's largest

financial retail marketing networks

1992 Enters the Funds Syndication sector

1995

Brokerage and Distribution businesses incorporated into a separate company - Kotak

Securities. Investment Banking division incorporated into a separate company - Kotak

Mahindra Capital Company

1996

The Auto Finance Business is hived off into a separate company - Kotak Mahindra

Prime Limited (formerly known as Kotak Mahindra Primus Limited). Kotak Mahindra

takes a significant stake in Ford Credit Kotak Mahindra Limited, for financing Ford

vehicles. The launch of Matrix Information Services Limited marks the Group's entry

into information distribution.

1998Enters the mutual fund market with the launch of Kotak Mahindra Asset Management

Company.


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2000

Kotak Mahindra ties up with Old Mutual plc. for the Life Insurance business.

Kotak Securities launches its on-line broking site (now www.kotaksecurities.com).

Commencement of private equity activity through setting up of Kotak Mahindra

Venture Capital Fund.2001 Matrix sold to Friday Corporation Launches Insurance Services

2003Kotak Mahindra Finance Ltd. converts to a commercial bank - the first Indian

company to do so.

2004 Launches India Growth Fund, a private equity fund.

2005

Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime

(formerly known as Kotak Mahindra Primus Limited) and sells Ford credit Kotak

Mahindra. Launches a real estate fund

2006Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital Company

and Kotak Securities

About Companys Important Persons

DIRECTORS

Mr. K. M. Gherda retired as a Director of the Bank at the Twenty Third Annual General

Meeting of the Bank held on 28th July 2008. At the same meeting, Mr. Asim Ghosh who was

appointed as an Additional Director of the Bank with effect from 9th May 2008, was appointed

as a Director of the Bank. Mr. Pradeep Kotak, Director of the Bank retires by rotation at

theTwenty Fourth Annual General Meeting. Mr. Kotak has expressed hisdesire not to seek re-

appointment.


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The Board of Directors of the Bank, at its meeting held on 12th May 2009, has re-

appointed Dr. Shankar Acharya as part-time Chairman of the Bank, for a period of three years,

with effect from 20th July 2009 subject to the approval of the shareholders and of the Reserve

Bank of India. The approval of the shareholders in this regard is being sought at the ensuing

Annual General Meeting of the Bank.

Mr. Shishir Bajaj was appointed as an Additional Director of the Bank with effect from 12th

May 2009 and, pursuant to the proviso to Section 260 of the Companies Act, 1956, holds office

as a Director up to the date of this Annual General Meeting but is eligible to be appointed as a

Director. In terms of Section 257 of the Companies Act, 1956 the Bank has received notice in

writing from a member along with a requisite deposit of Rs. 500/- proposing the candidature of Mr. Shishir Bajaj for his appointment as a Director.

Mr. Shishir Bajaj is an MBA from the Stern School of Business, New York University

majoring in Finance. Mr. Bajaj is presently the Chairman and Managing Director of Bajaj

Hindusthan Ltd. (BHL), the largest sugar and ethanol manufacturing company in India. He has

been looking after the affairs of BHL since 1974 shouldering its overall responsibility and was

made the Managing Director of BHL in 1988. He has over 35 years of extensive experience inthe Indian Sugar Sector

AUDITORS

Messrs S. R. Batliboi & Co., Chartered Accountants, auditors of your Bank, retire on the

conclusion of Twenty Fourth Annual General Meeting and are eligible for re-appointment. You

are requested to appoint auditors for the current financial year and to fix their remuneration.


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STATUTORY IN F ORMATION

The Companies (Disclosure of Particulars in the Report of Board of Directors) Rules,

1998, are not applicable to Kotak Mahindra .

EMPLOYEES

The employee strength of Kotak Mahindra along with its subsidiaries as of 31st March

2009 was around 18000, as compared to around 21000 employees a year ago.

The Bank standalone had around 8400 employees as of 31st March 2009. 179 employees

employed throughout the year and 88 employees employed for part of the year were in receipt of

remuneration of Rs. 24 lacs or more per annum.


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Corporate Identity

Kotak Mahindra Asset Management Company Limited (KMAMC)

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned

subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF).KMAMC started operations in December 1998 and has over 4 Lac investors in various schemes.

KMMF offers schemes catering to investors with varying risk - return profiles and was the first

fund house in the country to launch a dedicated gilt scheme investing only in government

securities.

They are sponsored by Kotak Mahindra Bank Limited, one of India's fastest growing

banks, with a pedigree of over twenty years in the Indian Financial Markets. Kotak Mahindra

Asset Management Co. Ltd., a wholly owned subsidiary of the bank, is our Investment Manager.They made a humble beginning in the Mutual Fund space with the launch of our first

scheme in December, 1998. Today we offer a complete bouquet of products and services suiting

the diverse and varying needs and risk-return profiles of our investors.

We are committed to offering innovative investment solutions and world-class services and

conveniences to facilitate wealth creation for our investors.


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Different people have different investment needs. The ability to take risks while investing in

financial products varies accordingly. In this section we present our wide range of Mutual Fund

schemes, which span across the risk-reward spectrum

Companys Product Or Services

Kotak 30 Kotak Midcap Kotak Opportunities

Kotak Lifestyle Kotak Contra Kotak Tax Saver

Kotak Equity Arbitrage

Fund

Kotak Emerging

Equity Scheme

Kotak Global Emerging

Market

Kotak Indo World

Infrastructure Fund

Management of one's finances to attain a defined goal calls for a lot of discipline, many a

times self-imposed. Our Systematic Investment Plan is a tool, which can help you, inject this

discipline in your financial management efforts.

Our Systematic Investment Plan (SIP) provides you the facility to periodically invest afixed sum over any defined period of time (6 months or more) in a disciplined manner.


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SIPs help in arresting uncertainties associated with trying to time the market and thus, in

the long term tends to iron out market fluctuations.

It also brings in the much needed investment discipline as you allocate a defined sum to

your investments for a defined frequency, thus making investments a mandatory component

while you allocate your resources.

It brings down your average cost of acquisition of units. As you would allocate a fixed

sum every month, you would buy more units when the prices of our units are lower than when

they are higher. We call this Rupee Cost Averaging.

Finally, through this arrangement, your funds otherwise lying idle (and if you know it, on

account of inflation, depleting in real value) in your bank account get channelised into future

wealth creating investments.

And of course, you stand to gain in terms of a more favourable entry load on your systematic investments.

Want to receive a regular stream of payouts in a defined frequency ? Want to book profits

periodically ?Our Systematic Withdrawal Plan (SWP) is designed keeping in mind these requirements

of yours. Through our SWP you can redeem defined sums at a pre-defined frequency by giving

a one-time instruction to us. You may choose to regularly withdraw either a fixed sum or just the

appreciation on your investments.

This facility caters to two segments of investor needs :

1) Investors wanting defined, regular funds inflow from their investments.

2) Investors interested in booking gains at a regular interval.If you require an exact amount regularly then the Fixed Option is suitable for you. If you

do not want this withdrawal to disturb your capital contribution and would like only to reap the


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appreciation generated in the investment, you should opt for the appreciation option. Ideally

SWP should be opted from the growth options of our schemes.

Want a phased entry into the Equity markets rather than putting in all your money at one

tranch? Want to book profits from your equity holdings and want your profits to continue

earning for you ?

Try our Systematic Transfer Plan (STP). Our Systematic Transfer Plan (SWP) caters to

your above needs.

Through our STP you can choose to switch your investments from one Kotak Mutual

scheme to another at a predefined frequency by giving a one-time instruction to us. You also

have a choice between switching a fixed sum or only the appreciation on your investments.

This facility caters to two segments of investor needs :

1) Investors wanting to time their exposure in the equity markets over a period of time

instead of a point in time. Such investors can invest in our Debt Schemes and choose a periodic

transfer of investments into our equity schemes.2) Investors who are already invested in equity wanting to book profits regularly and

allowing the profits to earn returns in any of our Debt schemes.

You can choose to transfer either a fixed sum every defined period or only the

appreciation on your investments over that period from one scheme to another. The later is

helpful, where you do not want the transfer to disturb your capital contribution.

Ideally STP should be opted from the growth options of our schemes.


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Want to receive your dividend entitlement and redemption payouts faster and straight into

your bank account.

Our Direct Credit Facility comes automatically to you (unless you choose otherwise) if you hold

an account with any of the 14 banks listed below :

ABN AMRO Bank Deutsche Bank Indusind Bank

AXIS Bank HDFC Bank Kotak Mahindra Bank

Centurion Bank of Punjab HSBC Standard Chartered Bank

Citibank ICICI Bank Yes Bank

Corporation Bank IDBI Bank

Direct Credit is safer, faster and convenient compared to the conventional cheque payout

mechanism.

Tired of running to the bank for banking your dividend cheques and then waiting for it to

clear. Leave your worries to us. Opt in for ECS of Dividends.

ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate, among

others, faster and seamless payout of dividends directly into your bank account.

ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective and hassle-

free. Besides, you don't run the risk of loss of dividend instruments in transit and the associated

delays in obtaining a duplicate instrument.

This facility is currently offered across all banks in over 71 locations.


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This is a one stop shop for you to transact online.

You can now do the following transaction online.

Your first investment should be through your distributor / directly.

To transact online you need to be an existing investor

You can purchase or redeem Kotak Mutual Fund Units sitting at the comfort of your

house or office at your convenient time.

No need to do paper work or travel to ISCs to transact.

Financial Transaction Purchase.Switch - in and Switch - out.

Redemption.

Non Financial Transaction

View your transaction status.

View and print your account statement.

Know latest unit balance.

Know latest market value.

Change your PIN number.


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Quality Policy& Objectives

Before you recommend a financial plan you must understand the needs and priorities of

your client. You should help him see synergies between his financial goals and your financial

plan objectives. For this you need to understand your clients

Investment objectives

Risk tolerance

Return Expectation

Cash flow requirement

Tax benefits

Organization Plans

Help them choose their investments

After having understood your client's needs, priorities and financial goals you have to

advice him on where to invest. Your relationship depends a lot on the advice you give to your

client. You should be honest and straightforward. Be completely focused on helping your client

to make a good buying decision. Here are some of the alternatives that can be presented to your

client.


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Encourage regular investment

You should ask your clients to start investing early and invest regularly. This will help

them to make more money because of the power of compounding of the rupee.

Commit them to invest

The best investment advice and investment plans are a waste unless they are backed by

the commitment of the client to invest. Be sure that the client gives you his commitment to

invest. Go a step further and be ready with all kinds of paperwork, application forms and other

documents required for the sale. Try and help him in any way you can.


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Provide personalized after- sales- service

The last and the most important part of the sales process is the augmented element. These

are the extra things that you include in your service that go beyond expectations.

It is in this area of exceeding expectations that you can set yourself apart from other

distributors.

It is by doing the things that go beyond what the client anticipates that you build high

levels of goodwill that leads to testimonials, resales and referrals to other prospective clients.

Some of the personalized services that you can provide are as follows

Making periodic calls to see if your clients need any help with their investments.

Getting in touch with them when there is a lot of fluctuation in the market prices and advising

them accordingly.

Continuously assessing any change in their personal circumstances and recommending a

change in investment plan if need be.

Keeping your clients updated of the new schemes and products, which could be useful for

them.

Since you represent the interest of both the investor and the mutual fund you must regularly

follow up with the mutual fund if your clients have experienced any service related problem.


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At the end of all remember the golden rule. Treat every client as a special and important

person. Be thoroughly prepared and knowledgeable. Be completely honest and straightforward.

Focus on helping them achieve their financial goals and see the results.


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CHAPTER-2

Performance Research


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Data Interpretation

Quarterly Results

First Quarterly Results (Rs. in Millions)

March2009

[4 Quarter]

December2008

[3 Quarter]

March2008

[4 Quarter]

Sales Turnover 8030.29 8035.19 7636.70

Other Income 1150.62 1090.30 393.51

Total Income 9180.92 9125.49 8030.21

Total Expenditure 2765.97 2941.25 2610.59

Operating Profit 6414.95 6184.24 5419.62

Interest 3850.36 4209.67 3728.88

Gross Profit 2564.59 1974.58 1690.74

Depreciation 0.00 0.00 0.00

Tax 575.98 382.00 123.75

ReportedPAT 1025.73 711.30 692.08

Equity Capital 3456.69 3454.74 3446.73

Extra Ordinary Items 0.00 0.00 0.00Adjusted Profit After Extra Ordinary Item 1025.73 711.30 692.08

Book Value 112.80 0.00 0.00

EPS 2.97 2.06 2.01

Dividend 0.00 0.00 0.00


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B alance Sheet

Kotak Mahindra Bank Ltd.

From FY 2007 2009 (In Millions)

Balance Sheet (Rs. in millions)

Liabilities

March- 2009(12 Months)

March-2008

(12

Months)

March- 2007(12 Months)

Share Capital 3,456.69 3,446.73 3,261.56

Reserves & Surplus 35,598.58 32,490.36 13,357.69

Net Worth (1) 39,055.27 35,937.09 16,619.25

Secured Loans (2) 59,040.71 51,192.53 50,997.52

Unsecured Loans (3) 156,449.34 164,236.46 110,000.91

Total

Liabilities(1+2+3)254,545.31 251,366.08 177,617.68

Assets

March- 2009

(12 Months)

March-

2008(12

Months)

March- 2007

(12 Months)

Fixed Assets

Gross Block 4,606.07 3,914.21 2,735.65

(-) Acc. Depreciation 2,472.51 1,811.72 1,324.78

Net Block (A) 2,133.56 2,102.49 1,410.87


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Capital WorkinPrgs. (B) 0.00 0.00 0.00

Investments (C) 91,101.81 91,419.89 68,619.65

Current Assets, Loans & Advs.

Inventories 0.00 0.00 0.00

Sundry Debtors 0.00 0.00 0.00

Cash And Bank 11,406.70 21,494.67 12,959.66

Loans And Advances 182,476.68 168,106.58 116,164.02

(i) 193,883.37 189,601.24 129,123.67

Current Liab. & Provs.

Current Liabilities 32,270.12 31,455.10 21,269.40Provisions 303.31 302.44 267.11

(ii) 32,573.43 31,757.54 21,536.51

Net Curr. Assets (i - ii) (D) 161,309.94 157,843.70 107,587.16

Misc. Expenses (E) 0.00 0.00 0.00

Total Assets

(A+B+C+D+E)254,545.31 251,366.08 177,617.68


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PRO F IT & LOSS ACCOUNT .

FROM YEAR 2007 TO 2009 (IN MILLION)

Profit & Loss Accounts (Rs. in millions)

March 2009

(12 months)

March - 2008

(12 months)

March - 2007

(12 months)

Sales 32,626.77 28,202.98 15,920.58

Other Income 420.00 140.78 59.32

Total Income 33,046.77 28,343.76 15,979.90

Raw Material Cost 0.00 0.00 0.00

Excise 0.00 0.00 0.00

Other Expenses 28,106.48 22,579.54 13,605.54

Operating Profit 4,520.29 5,623.44 2,315.04

Interest Name 15,465.98 13,095.63 6,992.40

Gross Profit -10,945.69 -7,472.20 -4,677.36

Depreciation 695.57 508.55 347.39

Profit Bef. Tax 4,257.84 3,966.59 2,026.97

Tax 1,499.60 1,038.48 618.80

Net Profit 2,758.24 2,928.11 1,408.17

Other Non- Recurring Income 2.74 11.22 5.49

Reported Profit 2,760.97 2,939.33 1,413.65

Equity Dividend 259.55 258.70 228.61


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Ratios

From Year 2007 to Year 2009

RatiosProfitability Ratios % March- 2009

(12 months)

March- 2008

(12 months)

March- 2007

(12 months)

Operating Profit Margin 13.85 19.93 14.54

Gross Profit Margin 11.72 18.13 12.35

Net Profit Margin 8.35 10.37 8.84

Turnover Ratios

Return On Investment 2.31 2.80 1.82

Return On Networth 7.06 8.17 8.50

Dividend Yield 10.07 10.29 18.91


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OPERATING MARGIN RATIO

Formula to calculate operating margin:

Operating Margin =

(earnings before interest and taxes)

sales

Operating margin definition and explanation:

The operating margin is also referred to as operating profit margin, or EBIT to sales ratio.

The operating margin ratio determines whether the fixed costs are too high for the production volume.

The operating margin ratio is included in the financial statement ratio analysis

spreadsheets highlighted in the left column, which provide formulas, definitions, calculation,

charts and explanations of each ratio.


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GROSS PRO F IT MARGIN

Indicates what the company's pricing policy is and what the true mark-up margins are.

Revenue - Cost of Goods Sold

Revenue

Gross Profit Margin Analysis:

The gross margin is not an exact estimate of the company's pricing strategy but it does

give a good indication of financial health. Without an adequate gross margin, a company will be

unable to pay its operating and other expenses and build for the future.


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NET PRO F IT MARGIN

First some basic profitability equations:

Net Profit Margin = Net Profit

* 100 =Profit before Interest and Taxation

* 100Turnover Turnover

Remember:

Net Profit = Gross Profit - Expenses

Why do we have two versions of this ratio - one for net profit and the other for profit before

interest and taxation? Well, in some cases, you will find they use the term net profit and in other

cases, especially published accounts, they use profit before interest and taxation.


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RETURN ON INVESTMENT

Formula to calculate return on investment:

RETURN ON INVESTMENT RATIO =

NET PROFITS BEFORE TAX

SHAREHOLDERS EQUITY

The return on investment ratio provides a standard return on investor's equity.

The return on investment ratio is also referred to as return on investment or ROI. Return

on Investment is a key ratios for investors


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RETURN ON NET WORTH

Net After Tax Profit divided by Net Worth, this is the 'final measure' of profitability to

evaluate overall return. This ratio measures return relative to investment in the company. Put

another way, Return on Net Worth indicates how well a company leverages the investment in it.

May appear higher for startups and sole proprietorships due to owner compensation draws

accounted as net profit.

Return on net worth, Return on ordinary shareholders' funds measures the rate of return on the

ownership interest (shareholders' equity) of the common stock owners. It measures a firm's

efficiency at generating profits from every unit of shareholders' equity (also known as net assets

or assets minus liabilities). ROE shows how well a company uses investment funds to generateearnings growth.


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CHAPTER-3CONCLUION & SUGGESTION


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Conclusion

After overhauling the all situation that boosted a number of Pvt. Companies associated with

multinational in the Insurance Sector to give befitting competition to the established behemoth

Kotak in private sector, we come at the conclusion that :-

y There are very tough competitions among the private insurance companies on the level of

new trend of advertising to lull a major part of Customers.

y Kotak have to work more to increase its sale or attract customers for investing, because

the operating profit margin goes very down in 2009.

y The positive point is that they are having consistent return on investment.y As a private player in the market kotak is facing problem in recovering its loans due to

which net profit of the bank came down by 2.02%.

y The entry of more Pvt. Players in the Insurance Sector has expanded the product segment

to meet the different level of the requirement of the customers. It has brought about greater

choice to the customers.


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Suggestion

The study has provided with the useful data from the respondents. There has a lot to be

recommended. Following are the recommendations:

y There is a need for better promotion for the investment products & services. The bank

should advertise its products through television because it will reach to the masses.

y More returns should be provided on Insurance plans.

As the bank provides the Insurance facility to its customers. It should provide this facility by tie

up with the other Insurance organizations as well. The main reason is that, the entire customers

do not want Insurance of only one company. They should have choice while selecting a suitable

Insurance plans. This will definitely add to the goodwill & profit for the bank.


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Chapter-4

B ibliography


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B ooks

Financial Management : Kalyani Publications

Corporate Accounting : Kalyani Publications

Cost Accounting : Kalyani Publications

Websites

www.indiainfoline.com

www.kotaklife.com

www.insuranceworld.com

www.corpbank.com

www.about.com

kotak mahindra finance performance n ratios

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